Asian markets take a breather as global rally hits pause

August 21, 2024 (MLN): Asian shares slipped on Wednesday as a stellar rebound in world stocks paused for breath, while bond yields and the dollar fell ahead of U.S. economic data and speeches from policymakers that are expected to make the case for interest rate cuts, as Reuters reported. 

The S&P 500 snapped eight sessions of gains with a 0.2% overnight drop. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.6%, it added. 

Hong Kong's Hang Seng slumped 1.4% with JD.com dropping 11% after Bloomberg News reported top shareholder Walmart plans to sell its large stake.

August 21, 2024 (MLN): Japan's Nikkei fell 1% at the open as a recovery from its collapse in early August ran into resistance around the 38,000 level, and more gains in the yen dented sentiment, it noted. 

"The sell-off itself has largely corrected, and the recession scare has given way to soft landing hopes again," said Bank of Singapore analyst Moh Siong Sim.

"But now we are back to square one and ... the market needs validation before it can be more relaxed, and that validation must come from data."

Later on Wednesday preliminary revisions to U.S. labour data are due to be published and a large downward revision is expected, which would support cutting interest rates. On Thursday, U.S. and global purchasing managers' index surveys are due.

The falling dollar has launched gold to record highs and returned the yen to 145.48 per greenback, a gain of 1.6% for the week so far and some 11% higher than last month's 38-year trough.

The euro is up nearly 3% for August to date and, at $1.1130 in morning trade, is at its highest since early December and testing major chart levels. [FRX/]

Interest rate futures have priced a 25 basis point U.S. rate cut next month, with a 1/3 chance of a 50 bp cut. Almost 100 bps in cuts are priced this year, and another 100 bps next year.

"Likely, the current softer tone of the greenback stems mostly from expectations that easier Fed policy is increasingly imminent," Rabobank strategist Jane Foley said in a note.

"This raises the question as to whether Fed rate cut hopes are still overdone and the risk of near-term (euro/dollar) dips back below $1.10."

Federal Reserve Chair Jerome Powell is due to make a speech at the Jackson Hole symposium in Wyoming on Friday. The Australian and New Zealand dollars held sizeable recent gains with the Aussie at $0.6747 and Kiwi at $0.6157. 

The mood kept bond markets supported and 10-year U.S. Treasury yields nudged lower to 3.81%, while two-year yields hovered at 3.9962%.

Commodity prices stabilised with Brent crude futures at $77.17 a barrel and Dalian iron ore finding a floor after a Bloomberg report that China plans to allow local governments to buy unsold homes in the latest property-market support measure.

China is the world's biggest steel consumer and markets are sensitive to any signs that construction could get back on track. Big miners' shares were steady in Australia.

Gold prices hovered at $2,516 an ounce, just below record levels touched on Tuesday.

In emerging markets, central banks in Thailand and Indonesia meet to set rates on Wednesday, though neither is expected to start cutting rates before the Federal Reserve.

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